November 2016 - Get Your Commercial Insurance Questions Answered by Licensed Professionals at My Insurance Question.com

Florida faces another new twist.

The workers’ compensation market in the state of Florida has faced some turbulent times over the last year. More shocking news came the Wednesday before Thanksgiving in the form of a ruling by Leon County Circuit Court. Judge Karen Gievers released the shocking news in the form of a ruling in a case that claims the National Council on Compensation Insurance (NCCI) and the Florida Office of Insurance Regulation (OIR) did not follow proper procedure under the states Sunshine Law.

The case that is challenging this ruling was brought before the court by James Fee. Fee is a Miami attorney who represents injured workers. He claimed, and Judge Gievers agreed, that NCCI was in violation of the Sunshine Laws by holding “multiple, non-public, secret meetings” internally and with the OIR over the rates. Representatives with NCCI and the OIR claim they have complied with the Sunshine Laws.

How much was the rate increase in Florida?

The total rate change was an in crease 14.5% for workers compensation insurance coverage, on average throughout the state of Florida.

What cause the rate increase?

The rate increase was the result of two court cases, Castellanos v. Next Door Company and Westphal v. City of St. Petersburg, and updates to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual mandated by Senate Bill 1402.

Castellanos vs. Next Door Company

Marvin Castellanos was an injured employee who sued Next Door Company. This court decision ruled invalid a previous court ruling from 2009. The previous ruling put in place a mandatory attorney fee schedule. THe overturn of this ruling means judges no longer have to stick to the mandatory fee schedule and now can award additional compensation for attorney’s fees. The judges now use the fee schedule as a starting point. This will cause the amount judges award to injured employees to increase dramatically because there is no longer a cap on what the judges can recommend for compensation to the injured employees attorney fees. This ruling resulted in the Florida Office of Insurance Regulation (OIR) approving an increase of 10.1 percent on average statewide.

Westphal v. City of St. Petersburg

The Westphal vs. City of St. Petersburg case found the 104-week statutory limitation on temporary total disability benefits to be unconstitutional. The Florida Supreme Court reinstated a 260-week limitation. This Increased the amount of time an injured employees will get partial salary benefits by an additional 156 weeks. This additional 156 weeks of coverage caused the OIR to approve an average increase of 2.2 percent statewide.

Senate Bill 1402

The additional 1.8 percent increase on premium for workers’ compensation was related to updates within the Florida Workers’ Compensation HCPR Manual. This increase was approved as part of Senate Bill 1402.

14.5% Workers Comp Rate Hikes in Florida! What do I do now?

You do what you can to do your business every day and create opportunities for yourself, your employees and your customers. Rates of everything is rising, property cost, materials, shipping, employee wages. The state of Florida has now said its time for workers’ comp insurance to do the same. The rate increase is to be 14.5%! Articles can go into much more detail but ultimately medical costs, legal costs and claims expenses rise over time and Florida workers compensation rates are rising to catch up for the natural changes that have taken place and certain court rulings have made precedence that support the increased cost. There are fair arguments for and against this change but at this point we work with what we have, so as a business owner what can you do?

The state of Florida is a rate mandated state for Workers Compensation which means the starting rate is the same for everyone based on their classification code, so every carrier should be offering the same rate. There are some exceptions that can be helpful for you to keep in mind. Here are a few things that can help benefit you in combating this increase with a more competitive option:

There are some exceptions: Some of our carriers have programs for particular industries that allow for discounted rates(5% below state set rates) one in particular caters to Retail stores, Restaurants and Professional Offices(Law firms, Accountants, Doctors offices, etc.)

Check with appropriate discount programs: The Florida workers compensation system has discount options available if you meet the guidelines and have these policies in place for your business. They do have an application for each and require certain protocols in place but these can save 5% on your Florida workers compensation rate.

Drug Free Workplace Credit
Safety Credit

Divident Plans: Some of our carriers offer dividend plans in Florida that reward businesses that control their claims. One in particular offers a 5% dividend for businesses paying 5-10k in premium and keeping a loss ratio under 5% and for accounts over 30k in annual premium they can qualify for a 20% dividend if they have a loss ratio under 20%. Like anything they do have some basic eligibility criteria but this is a huge way to reward safe business operations and lower your overhead against your competition.

Review loss control Measures: We do understand accidents do happen, however most accidents with better preparation can be prevented. A few areas to focus on:

Hiring Practices: Hiring the right employees that are experienced in the field and vested in your business are your lifeblood. Don’t put that in the hands of just anyone.

Safety Controls: Start with OSHA basics and if you have a unique business you might need more. Keeping your employees safe and preventing workers comp claims is the best way to save money on your workers comp.

Document everything: If you have safety meetings, a safety policy, drug free workplace, make sure this is all in writing and in your employee handbook. Make sure sign offs are in place so your employees are aware of these policies. This can be a great tool to prevent claims and keep a culture of safety that you take seriously in your business.

Manage your workers compensation claims: As you develop an Experience MOD over time for your Florida workers compensation claims history, your premium can go up or down based on this experience. This means your premium is directly affected by claims you had 2-5 years ago. Settling those claims and learning from them can help you combat the rising workers comp costs. This process takes time but you will thank yourself in the next couple years as that MOD drops lower.

Buy in to avoid the increase: If you have not placed your workers comp coverage for your business yet and are in the market, get this coverage before December 1, 2016. This is when the rate change takes place. You will still have to face the rates next year but at least this is one year you are paying 14.5% less on this policy.

Put some skin in the game: Especially if you are paying premiums in excess of $20,000 annual, Deductible plans as well as coinsurance plans can allow you to put some skin in the game and take on a little risk of your own. Some start as small as $500-$1000 deductibles but go up and the savings increases with that. It might not make a lot of sense for the smaller premium amounts but this is a good tool to help save money without putting too much of your business at risk. Pick a deductible that saves you money and you feel comfortable with.

Alternate payment options: Plans like Pay-As-You-GO can be helpful tools which allow you to pay your premium when you run your payroll. This won’t change the price but for companies that have a tough time with premiums in the slow season but still have a year round payroll, this can be a great solution.

In times like these were pricing can have such a direct impact on your business and its livelihood, Rate increases are inevitable, however taking these steps above if you are not already, could show savings of up to 25% below market for some clients but 5-10% is very obtainable for most clients. The increase in Florida is a tough one to swallow, however taking these actions could allow you to offset these increases. Speak with one of our Professional Insurance agents to learn how you can implement and benefit from some of these tools.

California Business Owners Trying to Avoid Workers Compensation Insurance

California has the most expensive workers’ compensation rates in the United States. California Workers Compensation premiums can be so expensive that business owners try to find creative ways to avoid paying workers compensation insurance for their employee labor. The common practice is turning employees into 1099 contractors with the thought that since they are no longer employees the business owner is no longer responsible for workers comp. Business owners have to be very careful when doing this. State Compensation Fund sends a document with all of their quotes defining a true Independent Contractor vs a 1099 that is technically an employee. Some of the determining factors laid out by SCIF to determine if the 1099 is an employee or an Independent Contractor:

Does the business have the right to direct and control? If yes, 100% Employee.
If the trade requires a license, Independent Contractor must have their own license. Employees use the business owner’s license to complete the work.
Who provides the instruments/tools to perform the work?
Has the Independent Contractor chosen the burdens/benefits of self-employment?

Another commonly used band aid business owners try to implement to avoid paying california workers compensation insurance premiums for employees is to give the employees a percentage of ownership then exclude them from coverage by having them sign the appropriate exclusion form. California business owners commonly give employees 1% ownership then exclude them from coverage to avoid paying workers compensation insurance. The state of CA has passed a new law effective 01/01/2017 that now requires a minimum ownership percentage before a CA business owner can qualify to be excluded from workers’ compensation insurance. Effective 01/01/2017 California business owners must own at least 15% of Corporate stock to qualify to be excluded. If a business owner meets the 15% minimum, they must sign the appropriate workers’ compensation exclusion form and file it with the insurance company.

All existing Corporations with a workers’ compensation policy must sign a new exclusion form with their insurance company by 01/01/2017. Otherwise the insurance carrier must INCLUDE the business owner from 01/01/2017 until a new exclusion form is signed and filed with the insurance provider. It’s best to circle back to your insurance agent to gather the updated exclusion form. If your insurance agent is not aware of this rule change or how to solve the problem, look for another agent such as myself. Workers Compensation Insurance is typically your biggest insurance expense, you deserve an agent that understands this type of insurance.

Commonly Misclassified Workers Compensation Class Codes

One of the most misunderstood and difficult parts of setting up a workers compensation insurance policy is classifying the type of work being done by each employee. With over 700 classifications there are a lot to choose from and some of the wording on the classification descriptions can be misleading. In most states, the classifications are written by the National Council on Compensation Insurance (NCCI). These class codes are one of the most important parts of the workers compensation policy, because they are one of the two driving factors in price or premium. The other factor determining what a business pays is the amount of payroll for the employees of that business. If the employees are not classified properly, there is a chance that upon an end of term audit for a significant difference in rate between the classifications. This can cause either a large increase in premium owed, or a refund because too much has been paid into the policy. Here are some examples of my experiences with some classification codes that are commonly misused. Hopefully this will help you as a business owner more effectively classify your business with the proper workers comp codes.

Class Codes 5606

Contractor – Project Manager – Construction Executive – Construction Manager or Construction Superintendent

In my opinion, this classification is one of the most misused of all 700 codes. This classification is designed for an employee who is in charge of a construction project, but the employee does not take part in any of the physical work whatsoever. They also cannot have direct contact with the employees doing the work. They must be talking with the foreman who then will line out the work to be done by the employees on the job site. This position is mostly work being done in the office, but occasionally will include going to the job sites to check in with the foreman’s.

Class Codes 5437

Carpentry – Installation of Cabinets or Interior Trim

Carpentry is one of the commonly mis-classified class codes when it comes to general contractors. General contractors cannot separate out this classification from other work being done. Even if the other work was done weeks prior, the contractor still cannot use this classification. It will default to the classification that has the highest risk for the work done at the job site. The higher risk typically has a higher rate of premium. This particular classification is designed to be used by an artisan (specialty) contractor. This is someone whose scope of work is only doing the installation of cabinets or trim inside of the structure. This person is not doing any other type of work on the building. It is a very specific classification and the rate for this type of work is much less than all the other construction classifications. For this reason, if a business is using this classification and it is incorrect the business will owe a very large amount at the end of the term after an audit.

Class Codes 8810

Clerical Office Employees NOC

Clerical employees are typically one of the least expensive class codes. This is for a good reason because the chances of someone sitting behind a computer being injured is very small. Since it is the least expensive classification, it is common that business owners try to classify as many of their employees as they possibly can with this code in an attempt to reduce cost. The biggest requirement for this classification is that there has to be physical separation of the clerical employee from the other work being done at the location. This separation can be a wall or even a reception desk. The other caveat of this classification is that you typically cannot use this in conjunction with any other classifications. People within the insurance industry refer to this as a standard exception class code. The standard exception class code means the employee cannot be doing any other class of work. You cannot have an employee who is classified as 5437 (trim carpenter) and then have the same employee come back into the office to be assigned class code 8810, which is a less risky class code. Some states may have certain instances where they allow this code to be split. Missouri is one such state that allows an owner to assign 10% of their payroll to the 8810 class and the remaining to the governing code. It is important to check the regulations of the state you are operating in to make sure.

Standard Exception Class Codes

As referred to with the clerical classification (8810) they cannot be used in conjunction with any other classification. There are three of these class codes that are commonly misused in this manner, 8742 (outside sales), 8810 (clerical), 7380 (delivery). Make sure that if you are using these classifications the employee is not participating in any other aspect of work being done in the company that should be classified elsewhere.

Conclusion on Class Codes

The biggest take away from this is a business owner should verify all the classifications the agent is using on the policy of their business. The insurance agent is in the business of analyzing risk. It is in their best interest to always assume more risk. This is because it is a lot easier for the agent to explain that a business over paid. This is easier than explaining that a business under paid and now they owe additional premium. Plus the insurance agent can only operate off of the information you give them about your business. No one knows your business better than you. For this reason, it is important to take an adequate amount of time to talk with your agent. Talk with them about all of the ins and outs of your business. This will help them properly protect your business.

It is equally important that part of your conversation with your agent is to talk through the class codes. Take time to make sure the class codes are being properly assigned. You can always look up class codes online as a consumer through several different sites. Most agents will be more than happy to explain why they used a particular classification. Classifications can sometimes be very tricky and it can even vary by how a particular insurance carrier views the work being done. A little research and questioning to make sure things are set up properly can end up saving you a lot of hassle. It will also save you money upon the end of term audit. For this reason, it is important to establish a comfortable working relationship with your insurance agent.

My Insurance Question is a contribution of the experts at The Insurance Shop LLC. The Insurance Shop was founded in 2005 as an independent insurance agency that partners with a couple dozen insurance carriers. This large amount of carriers allows the agents at The Insurance Shop the ability to shop your policy around in an attempt to make the carriers compete for your business. If you are looking for a better value when purchasing your commercial insurance package, let us shop insurance so you don’t have to. Give us a call today at 800-800-4864.

Overcoming Difficult Workers Compensation Situations

Often times I speak to business owners that are experiencing difficulties with their work comp coverage. Either they are being non-renewed and cannot locate an alternate option OR their renewal pricing has skyrocketed to a point they are begging for help to locate a less expensive alternative. Typically, the difficult situation is related to claims. Below is a real life situation with a business that I assisted solving their difficult workers’ compensation situation and how the changes they made within their business helped decrease their pricing in future policies. For purposes of privacy, I am using a false business name, Test Company, Inc.

When Test Company, Inc. contacted my agency, they were up against a non-renewal, no other insurance company options and had employees in multiple states. Within work comp there is a state program that is required to offer coverage even with bad claims history or a difficult industry to insure. The state workers’ compensation programs are higher rates and typically do not have a flexible payment plan so cash flow becomes an issue. Also, instead of having 1 annual workers’ compensation audit for all states with 1 company, Test Company, Inc. was going to need to complete 12 audits, 12 separate policies to monitor and make payment to. Most state policies only cover that particular state so a separate policy is purchased for multiple states when private insurance companies are not willing to quote.

Test Company, Inc. had grown from 0 to 6MM in gross receipts in 5 years and suffered several very substantial claims. Their workers’ compensation cost had increased from 200K to nearly 500K due to their claims experience generating a very high experience modification rating and the competitive companies unwilling to quote. The ownership of the business was so focused on growing, they didn’t think about how claims were going to cause this big of a problem with their workers’ compensation coverage. Claims were happening over multiple years of coverage and it finally caught up to them so they were forced to identify the problems and fix them.

Together we identified the reasons for the claims and communicated about realistic business practices that needed to be implemented to prevent similar claims from happening in the future. The employees working in the field have a constant driving exposure and when working at the customer’s home, the Techs are moving heavier items. There was a driving and lifting exposure that were causing the claims. First step was to set-up a Motor Vehicle Report (MVR) program to review the driving history of the employees in a vehicle to make sure those employees have a safe driving record. When setting up a MVR program Test Company, Inc. must establish a set of requirements that are considered “a safe driver”. Most work comp providers have resources the insured can access to help with establishing guidelines to prevent claims, ask the insurance companies “loss control department” for assistance if your agent doesn’t know. Secondly, we discussed hiring practices for Techs. Since these employees have a lifting exposure it’s important to hire employees that are strong enough and haven’t experienced injuries in the past that could lead to a large workers’ compensation claim. A pre-employment and annual physical for all Tech’s was the solution Test Company, Inc. implemented.

With a business of this size and growing, claims are going to happen. When there is a claim, what can Test Company, Inc. do to minimize the amount paid?

It’s amazing how stories throughout the process of a work comp claim happen. One of the best suggestions to prevent an employee’s story from changing is to Immediately document the injury, have the employee sign the injury report form, have a supervisor or key employee drive that employee to the medical clinic and have the supervisor or key employee sit with the doctor’s office when explaining what happened that caused the injury. Record it with a cell phone if it’s allowed and you think it’s needed. These steps will prevent a story from changing and an employee’s injury mysteriously becoming more serious than it should have been.

Return to Work Program. This particular insurance company has a non-profit program where their insureds can set-up a light duty return to work program with a local participating non-profit. Test Company, Inc. did have a work comp claim where the Return to Work Program worked perfectly. The Tech employee hurt their back, therefore, could not lift the objects within the homes they would be working on. This employee was set-up with a local non-profit where the employee sat at a table and folded towels. 2 days of doing this and the employee’s back felt better, he was released by the Doctor, the claim was closed and the employee returned to work.

When making these changes it’s extremely important for Test Company, Inc. to put them within their Employee Handbook, communicate those changes to the employees and have them sign off on a notice form. This helps set the standards for current employees and future hires.

The pricing decrease doesn’t happen overnight. The business must implement changes then experience 1,2,3 years of positive claims history proving their changes have led to a safer business to insure.

3 tips for effectively managing risk in the Non-Profit Industry

People go in to the non profit industry for a wide array of reasons. For most people, that reason has something to do with serving their community. Many people in the non profit Industry do not anticipate having to manage risk, but how effectively their organization manages risk will contribute immensely to the success or failure of the organization. Some of the aspects of managing risk include: developing safety programs, writing liability waiver forms, designing a return-to-work program for injured workers or purchasing workers’ compensation insurance. In order to effectively manage risk, here are three tips every Non Profit Professional should consider when determining how to manage the risks your organization faces.

Find the best info about insurance for Non Profit businesses at My Insurance Question.com

Have an effective safety program in place.

Having an effective safety program in place is essential for all non-profit organizations. First and foremost, this is simply the right thing to do. It is the right thing to do for your employees, for your volunteers and for your organization as a whole. The success of the safety program starts with the leaders of the organization. If the leaders of your organization make it clear that you value safety, the employees and volunteers will value safety as well. What an effective safety program looks like will differ depending on the scope and mission of your organization. A safety program for local soup kitchen will be dramatically different than an NGO that distributes medicine across several different countries. For that reason, it is important to invite a risk management professional to sit on your board of directors. If you do not know someone in this field you can consult with your insurance agent. They typically have generic programs in place for many different industries.

Deciding when and if your organization needs to purchase insurance?

For a small or recently founded organization, you may be able to do without insurance for a short period of time. This is not something to take lightly. No matter how little money your organization has, not securing proper insurance can lead to your organizations failure if an accident does happen without proper coverage. Eventually there will come a time when your organization will need coverage. The state you are located in will determine when you are required by law to purchase some coverages. Workers’ compensation insurance is usually the first coverage you will be required to purchase. This policy covers the risk of bodily injury to your employees. General liability insurance covers bodily injury and property damage done to third parties. These third parties may be the people you serve or anyone who comes in contact with your organization. These two policies are typically the first policies a non profit will consider and they are the bare minimum coverage. As your organization grows these two policies may not fully cover your business from all risks. You may not understand all of the risks you actually face and the types of insurance you need. Consulting with an insurance professional whom you trust is important at this stage in your risk management process. Asking someone who works in insurance to volunteer with your organization or to sit on your board is a good idea.

Have a return-to-work program in place for injured employees.

Developing an effective return-to-work program is something that can be a work in progress. Ideally your safety program works and you do not have many injuries. Even if you only have the occasional minor injury, it is best practice for your organization to have a plan for getting an injured worker back to work as soon as possible. The quicker they get back on the job the more likely they are to return to regular work and the mission of your organization. Some common jobs for injured workers include basic office work like stuffing envelopes, answering the phone or writing thank you letters to donors. Getting people back on the job quickly is important because people who work in this industry frequently have a special relationship with the work they do. Many of them want to be a part of something greater than themselves. This is especially true with the millennial generation. When these people are injured and not able to work, part of their life is taken from them. The longer it is not a part of their life, the more likely they are to not come back to work at all. This is when the cost of a claim can become the greatest and is when you can expect to see an increase in your insurance premium. Having an effective return-to-work program can help these employees get back on the job, control the cost of your workers’ compensation claim and continue the mission of your organization.

Declaration Page. What is it? Where is it? Is it important?

I am sure at some point in time you have had an insurance agent ask you for your policy declaration page or pages. If you are like most business owners, you think to yourself what are they asking me for. Basically, what these pages represent are the cliff notes of your insurance policy for that particular line of insurance. You will notice that your worker’s compensation declaration page is shorter than your business owners package or general liability. These declarations will not list all of the exclusions in your policy. It will only list the coverage limits you currently have. Here is the definition of declarations: The front page (or pages) of a policy that specify the named insured, address, policy period, location of premises, policy limits, and other key information that varies from insured to insured. The declarations page is also known as the information page. Often informally referred to as the “dec” or “dec page.”

The next thought most business owners have is, where do I find the declaration page. The declaration page or pages can be found in the front 3^rd of your insurance policy. Most of the time it’s within the first 10 pages. This is especially the case for worker’s compensation. For your general liability and business owners package policy it may be a few further pages in. The key to identifying it is when you start to see wording such as limits or premium. When you see that and how the premium pricing is broken down then you are in the right place. It will show your experience mod from the current term, premium discounts, state taxes, fees, expense constant, and a few other items on there. Some of this will vary on what type of policy it is.

This information is important to insurance agents for a wide variety of reasons. Most of the time a business owner thinks we only want to see these pages so that we can beat the price on your current policy. Yes, that is helpful information to use but it doesn’t necessarily mean that our carriers will just price it below your policy just in order to win your business. Our underwriters like to know pricing information so they can compare it to other policies that are either doing the exact same type of business or something very similar, and offer you a quote accordingly. If they generally don’t know what you are paying, then they will go on the conservative side and offer a policy that is in the average of pricing for that industry based on where they have priced and written the type of business you are doing. I feel, the most important reason for this to me is that I like to view these pages to give you an apples to apples comparison of the two policies. Also, I can check to see if you are truly covered correctly. If their may be gaps that are missing some key coverages or are underinsured in areas that you would not want to be underinsured in. Thus we can present you with a quote exactly like the one you have with the same coverage and limits. This will also enable us to present another quote option, if necessary. Typically this option is where we think your limits should be and additional coverages that you may not have that most people in your line of work have. The key to remember when being asked for your declaration page or pages is that we as insurance producers are wanting to make sure your covered correctly and at a fair price. We are here to get you a fair price, but we are also here to make sure you do not have any gaps when a claim does occur. We don’t like audit surprises or coverage gaps at the time when you think you are covered just as much as you do. The declaration page is so much more than just a price to beat.

The Importance of Accident Prevention in the Workplace

It may seem obvious that it should be the goal of employers to focus on accident prevention in the workplace. However, for those that need a little additional encouragement, here are some reasons to prioritize safety in the workplace.

Caution signs are essential to accident prevention in the workplace.

Accidents are financially expensive

Businesses exist to create profit. Most businesses are relatively low profit margin and work very hard to create that profit margin. Workplace accidents lead to extra financial expenses. They can also add costs to insurance policies through increased rates or a worse experience modification factor.

For example, if a business operated at a ten percent profit margin (which is well ahead of many businesses), they would need $50,000 in additional revenue to offset $5,000 in extra expenses created by an on the job injury. That could lead to extra hours worked by ownership, having to cut positions or hours or other difficult budget decisions.

Reduced workplace morale

There are more than just financial costs due to workplace injuries. A lack of accident prevention can reduce morale of other employees. Sometimes the morale can be reduced as a result of having to work longer hours or harder to make up for injured employees that have to miss work. It may result from financial strain on the business due to the injury. It also may arise simply because employees don’t like to see their co-workers suffer.

Recent Trends

It’s hard to argue against the importance of workplace safety. As a result, there have been recent trends by workers’ comp insurance carriers to help with accident prevention in the workplace. Carriers such as Missouri Employers Mutual, Utah Business Insurance Company and Guarantee Insurance Company offer extensive loss control services. Additionally, some carriers offered reduced cost items for workplace safety. These items include The Hartford’s Shoes for Crews incentive, incentives for a healthier workplace, weight loss programs as well as discounts on ergonomic office furniture. Missouri Employers Mutual just launched a safety grant program for their clients to help defray the costs of large one-time purchases to make workplaces safer.

Most employers want to protect their employers and focus on creating a safe workplace. Some of the reasons listed above highlight the benefit to focusing on preventing workplace accident for all employers.